From Amazon to Wal-Mart, digital retail is producing more jobs and higher pay
Retail trade is one of the biggest job sectors in America, and the vast majority of those workers still clock in at brick-and-mortar stores. But the big growth is coming from e-commerce, which happens to pay a lot better, too.
This is a promising development for retail workers who worry about thousands of store closings and the march of automation. E-commerce also offers a potential antidote to years of low productivity growth and income stagnation.
“If this new pattern continues, it will raise real wages across the economy and rejuvenate the middle class,” said a report by economist Michael Mandel of the Progressive Policy Institute in Washington.
By his definition, e-commerce includes online shopping, mail order and warehousing. That’s a more expansive category than usual and was created to capture the growth in what Mandel calls advanced distribution.
That includes Amazon’s fulfillment centers, which are popping up around the country, and the distribution centers that other retailers have added to offer two-day delivery and in-store pickups.
Since the end of 2007, e-commerce added 397,000 jobs nationwide, Mandel said. That’s over twice as many hires as the other retail categories, and the differential is much greater when adjusted for work hours. Stores often employ part-timers, and fewer full-time equivalents work in brick-and-mortar retail than a decade ago, he said
Retail trade accounts for almost 1 in 9 jobs in the U.S. This year, retailers are on pace to close over 8,000 stores, more than during the worst of the recession. That’s stoking fears of major disruptions.
This month, a report by the Cornerstone Capital Group in New York warned that up 7.5 million retail jobs were at risk. It cited automation and cost pressures from online competitors. One of the report’s co-authors said that job cuts in retail wouldn’t be matched by job creation in e-commerce, but Mandel’s research tells a different story.
“I was completely surprised by this,” Mandel said in a phone interview. “Who looks in the warehouse sector for anything interesting?”
It turns out that scores of big projects were generating jobs around the country. He found increases in fulfillment center jobs in Kentucky, Tennessee, Indiana and Pennsylvania. And wage data showed that those workers were getting a healthy premium.
Last year, the e-commerce segment paid an average of about $43,000 annually in Texas. That compares with an average of $31,000 in brick-and-mortar retail, he said. Nationwide, the premium was slightly lower but still significant.
Mandel believes workers are being rewarded for being more productive while consumers are flocking to companies with lower prices and better service.
“It’s a virtuous circle,” Mandel wrote.
Many emerging jobs in e-commerce are a blend of cognitive and physical work. Employees have to use the latest software and devices, and be able to lift boxes. He said the jobs are reminiscent of the manufacturing surge of the early 20th century, which helped create the American middle class.
Amazon was the fastest company to hire 300,000 workers in U.S. history, Mandel said. In January, it pledged to hire another 100,000 for full-time, full-benefit jobs. Employees also can earn tuition reimbursement for high-wage fields, even if the positions are not at Amazon.
Since 2013, Amazon has opened or announced nine fulfillment centers in Texas and has hired over 10,000 in the state.
Brick-and-mortar stores are changing in a hurry. Last fall, Wal-Mart spent $3 billion to buy Jet, a leading e-commerce company. It’s also investing in employee education and training, and setting higher expectations, CEO Doug McMillon told the Harvard Business Review.
“We need store associates and managers who can operate handheld devices, do analysis, ask questions, receive data, and basically run a store within a store,” McMillon said. “Your success depends on forecasting. How do you think about the weather? What’s going on in the community? What other variables do you look at?”
Employees who run older parts of the business must become digital, too: “We can’t have some people live in yesterday while others live in tomorrow,” he said.
Some retail workers will be left behind, just as some suffered after big-box retailers expanded aggressively, Mandel said. But the coming transformation will offer opportunities.
That may be with their current employer. As retailers pivot, they’ll have to develop most of their future workforce, the Cornerstone Capital study said. It cited tuition programs at Amazon, Lowe’s, Gap and Wal-Mart. Advanced Auto Parts and O’Reilly Automotive also offer programs to help employees get certifications.
“No job is necessarily a dead-end,” said Andy Challenger, vice president of Challenger, Gray & Christmas, an outplacement firm. “Big companies are always letting go of people in one area and hiring in another. You want to stay ahead of the trend if you can.”
He suggests asking others about growth areas and researching what competitors are doing to develop employees. Retail experience, especially in sales and customer service, often transfers to other industries. And being flexible about learning can make all the difference.
“To be able to adapt to new technology and a new culture is almost the most valuable skill today,” Challenger said.